
Abstract
A setting of reliance investments is explored where one of the parties to a contract obtains private information concerning his utility or cost function that remains hidden to the other party and to courts. As a consequence, it will be a difficult task to award expectation damages corrrectly to a party with private information who sufffers from breach of contract. While a revelation mechanism would exist that leads to the first best solution, assessing expectation damages correctly turns out to be at odds with ex post efficiency. I conclude that, under asymmetric information, the performance of expectation damages falls short of what more general mechanisms could achieve.
Item Type: | Paper |
---|---|
Keywords: | reliance investments, expectation damages, breach of contract, hidden information |
Faculties: | Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A5 - Unvollständige Vertragsbeziehungen und die Gestaltung von Residualrechten |
Subjects: | 300 Social sciences > 330 Economics |
JEL Classification: | K12, D82 |
URN: | urn:nbn:de:bvb:19-epub-13389-3 |
Language: | English |
Item ID: | 13389 |
Date Deposited: | 10. Jul 2012, 13:09 |
Last Modified: | 04. Nov 2020, 12:53 |